Potential Mechanisms. In a summary of the literature on the income gradient in health, Xxxxx et al. (2012) point out that previous work has not been able to conclusively explain the positive association between income and health. Consistent with standard economic models of the demand of health, which introduced the concept that individuals invest in their stock of health, a higher minimum wage could affect health by changing health-related behavior of low-wage workers. Using available data in the BHPS, I examine whether the NMW affected a number of activities that are related to overall well-being of individuals, such as leisure expenditures, family vacations, membership in sport clubs, as well as smoking and drinking. The first two outcomes could affect health following the assumption that leisure activities and family vacations increase overall utility, whereas the other outcome could directly impact workers’ health (Xxxxxxxxx et al. 2014). Other channels through which minimum wages could influence health are financial and job-related stress. This idea is consistent with early work in the medical literature which established the presence of physiological reactions to stress for diseases of the heart and the circulatory system (Sterling and Xxxx, 1981; Xxxxx, 1982). Similarly, the World Health Organization (WHO, 2013) points out that circumstances related to social and psychological well-being are capable of causing long-term stress through lack of self- esteem, social isolation, anxiety and stress at work. In an analysis of the recent economic downturn in the US, Macy et al. (2013) show that financial stain negatively affects health behavior. This study examines the role of financial and job-related stress by estimating the effects of the NMW on five outcomes, which equal to one if respondents report to: (1) be in a better financial position than one year ago; (2) expect his or her financial situation to worsen over the next year; (3) be in a very difficult financial situation currently; (4) be satisfied with his or her job; (5) be satisfied with the payment received at his or her job.
